Ebooks must stay fat with VAT, blame the EU, MPs told

When it comes to applying VAT to ebooks, the UK government remains bound by EU law, the Exchequer Secretary to the Treasury told MPs yesterday.

In October 2010 HM Revenue & Customs described the process of supplying "text by electronic transmission" via the internet - such as Amazon flogging ebooks on its Kindle Store - as standard-rated (the 20 per cent VAT rate).

Many publications, including printed books, maps and charts, magazines and newspapers, are zero-rated, but ebooks are classified differently. And Treasury minister David Gauke, when quizzed by Labour MP Tom Blenkinsop, reiterated that the ebook ruling remained unchanged.

"Under EU law, VAT on electronic books must be charged at the standard rate," Gauke said.

"Existing agreements with our EU partners do not allow the UK or other member states to introduce a new zero-rate or extend an existing one to relieve ebooks from VAT and they specifically exclude electronically supplied services, which includes ebooks, from a reduced rate."

That means that a customer wanting to buy the £12.99 digital version of Amazon's bestselling book of the year - Walter Isaacson's biography Steve Jobs - will be expected to fork out £2.22 more than they would be required to pay for the hardback copy at £10.77 a pop.